Welcome to our Gold Friends weekly e-mail.

The results of EUCO's virtual meeting dominated the week as proposals for a financial "package" multiplied - together with varied thoughts on "corona" bonds. More fundamental thoughts about the EU's political structure are also emerging, but the pressure to keep "sustainability" at the centre of the policy response remains unabated. Bank shares hit a new historic low but have rallied nearly 20% as early results for the first quarter were not as bad as some feared, and the Commission announced an emergency package of amended bank regulations to ease the pressure on bank capital.

General Financial Policy

Coronavirus Response: Commission adopts banking package to facilitate lending to households and businesses in the EU : This package ensures that banks can continue to lend to support the economy and help mitigate the significant economic impact of the Coronavirus - including an Interpretative Communication on the EU's accounting and prudential frameworks and a targeted “quick fix” amendments to EU banking rules. View Article

ECON: MEPs call for concrete details and novel tools to address the economic crisis : MEPs quizzed Commissioners Dombrovskis and Gentiloni on planned measures to tackle the looming economic crisis due to COVID-19. View Article

BIS: Covid-19 and corporate sector liquidity : The Covid-19 shock is placing enormous strains on corporates cash buffers. Corporate financial statements from 2019 suggest that 50% of firms do not have sufficient cash to cover total debt servicing costs over the coming year. View Article

Banking Union

AFME welcomes European Commission legislative proposal on Capital Requirements Regulation but more is needed : We strongly support the measures contained in today’s fast-track proposal, which should help towards achieving this goal and should be concluded as rapidly as possible. However, more needs to be done to mitigate the impact of Covid-19 on businesses and the economy View Article

 EBF supports Covid-19 update on EU banking package : The European Banking Federation welcomes the EU legislative initiatives for regulatory flexibility to boost bank lending announced today by the European Commission and hopes that the measures proposed will be implemented within the short timeframe laid out  View Article

 BIS: Buffering Covid-19 losses - the role of prudential policy : To avoid a reduction in credit to the real economy, authorities need to ensure that banks have the capacity and willingness to make use of the flexibility afforded by the buffer release. Payout restrictions on banks and risk-sharing between banks and the public sector will be key. View Article

 The evaluation of the Consumer Credit Directive: EBF’s views : The EBF believes that the Directive on consumer credit provides a sound and solid framework on fair access to credit, together with clear provisions on consumer protection. View Article

Capital Markets Union

 EBF Contribution to the High-Level Forum on the CMU : The European Banking Federation fully supports the European Commission’s efforts to relaunch the Capital Markets Union (CMU). The EBF sees the need for further integrated capital markets, not least given the strains imposed by the pandemic.  View Article

 ISDA: A Pro-cyclical Problem : Regulators have typically tried to avoid putting in place measures that are explicitly pro-cyclical, but the recent bout of coronavirus-related volatility is resulting in a significant increase in trading book capital requirements that could impede the ability of banks to deploy capital. View Article

Environmental, Social, Governance (ESG)

 EU Technical Expert Group on Sustainable Finance: Sustainable recovery from the Covid-19 pandemic requires the right tools : Clear policy priorities: The Members of the European Council identified the central role of the Green Deal in its Roadmap for Recovery from the Covid-19 pandemic View Article

 OECD: An Inclusive, Green Recovery is Possible: The Time to Act is Now : Governments have a unique chance for a green and inclusive recovery that they must seize – a recovery that not only provides income and jobs, but also has broader goals, integrates strong climate and biodiversity action, and builds resilience. View Article

 WBCSD: 2020 - the "super year" for sustainability - had a promising start : In January, the World Economic Forum Annual Meeting focused on "Stakeholders for a Cohesive and Sustainable World", which gave a clear sign that sustainability and stakeholder capitalism are now firmly at the center of global debates.  View Article

 Accountancy Europe: Sustainable Finance Update March - April : European Commission consults on a renewed Sustainable Finance Strategy ESAs seek input on propose ESG disclosure standards for financial participants Council adopts the EU taxonomy regulation on sustainable finance TEG on Sustainable Finance issues its final recommendations View Article

WWF: EU's bank recovery billions must be green - NGOs : In their letter, sent to the EIB president today, the NGOs urge the bank to use the recovery package to make further steps in this direction. View Article

 IA outlines shareholder expectations on executive pay in light of COVID-19 : The IA has today outlined shareholder expectations on executive pay in light of COVID-19 in its latest guidance to companies.  View Article

 ICGN: Social factors ‘now key to good corporate governance’: The Covid-19 pandemic has highlighted social failures and “deep” inequality which must be addressed by business, warns the global governance body. View Article

ACCA: Covid-19 Global Survey: Covid-19 having significant impact on the world’s auditors : 53% of respondents say they’re experiencing pressures completing client services work, and 36% say they face an inability to meet reporting deadlines. The research covered over 10,000 finance professionals from over 100 countries.  View Article

European Commission: Consultation on the renewed sustainable finance strategy : Deadline extended to 15 July  View Article

Fin Tech Regulation

 Vox: Embedded supervision: How to regulate Libra 2.0 and the token economy : This column uses the revised proposal for the Libra global stablecoin as an example to illustrate possibilities for supervisors to harness information in distributed ledger based-finance via ‘embedded supervision’. View Article

Economic Policies Impacting EU Finance

Conclusions of the President of the European Council 23 April 2020 : We welcomed the Joint Roadmap for Recovery setting out some important principles: solidarity, cohesion and convergence. It further defines four key areas for action: a fully functioning Single Market, an unprecedented investment effort, acting globally, and a functioning system of governance. View Article

Bloomberg: EU Recovery Fund Should Be Around $1.6 Trillion, Gentiloni Says : A European Union recovery fund worth around 1.5 trillion euros ($1.62 trillion) needs to be available by mid-September and include loans as well as a portion of non-repayable money, EU Economy and Financial Affairs Commissioner Paolo Gentiloni said. View Article

EU fails to settle rifts over size and shape of ‘recovery fund’ : EU leaders have failed to resolve deep divisions over whether their proposed “recovery fund” will provide sufficient help to embattled member states as they debate the size of the proposed instrument and the amount of cash it will distribute. View Article

Reuters Explainer: What we know of EU Commission's post-coronavirus economic recovery plan : A huge stimulus package to kick-start the EU economy once the coronavirus pandemic ends is likely to feature a mix of loans and grants and be underpinned by private sector investments.It is being drafted by the European Commission for review by the bloc’s leaders by around mid-May.  View Article

SAFE: Corona and Financial Stability 4.0: Implementing a European Pandemic Equity Fund : Policy Letter 84 focuses on the principles and conditions relevant for the operationalization of a European Pandemic Equity Fund (EPEF). View Article

MEPs Garicano and Verhofstadt: Toward a European Reconstruction Fund : Following a recent agreement by the Eurogroup of eurozone finance ministers on a COVID-19 rescue package, Europe is well positioned to maintain liquidity for the time being. But if it wants to avoid political infighting and set the stage for a post-pandemic recovery, it will need to go further. View Article

Vox: Maturity, seniority and size: Make sure the ESM’s pandemic crisis support is fit for purpose! : A discussion is playing out in European capitals, most intensely in Rome and Madrid, regarding the usefulness of tapping these credit lines. View Article

Business Europe: EU solidarity and immediate cash availability is essential : Europe is at risk of huge job losses and a sustained shutdown is likely to lead to bankruptcy and closure of many businesses, particularly SMEs, in both services sectors hit directly by the shutdown and in the manufacturing industry. View Article

 FT - Munchau: How to think about the EU’s rescue fund : The deed is done. Italy’s “coronabond” is history, and so is Spain’s proposal of a perpetual bond as a fiscal stabiliser.The leaders of the EU may not have reached final agreement. But they set the direction: View Article

 Spinelli Group: Duff - A Federal Europe: the way out of the crisis : A way to break the deadlock over the MFF: restructuring the EU budget into federal and confederal parts. Eurobonds could then be launched without changing the treaty or breaking the balanced budget rule, and at no extra cost to national treasuries.  View Article

Politico: Thomas Piketty: Willing EU countries should spearhead fiscal union : Economist says balancing globalization with a fair tax policy will be the main task for EU capitals in the 21st century.  View Article

POLITICO: Pension funds spared in latest FTT draft : Countries in talks over an EU financial transaction tax can exempt their pension funds from paying the levy, according to a draft obtained by POLITICO. View Article

Brexit

Press statement by Michel Barnier following the second round of future relationship negotiations with the United Kingdom : In recent days, the UK government has made clear that it would refuse any extension of the transition period. We take note of this choice. My recommendation is to think carefully about this question of extension, taking into account the economic situation and the consequences of our decisions.  View Article

FT: Boris Johnson tells EU to shift Brexit stance : Boris Johnson has warned EU leaders they will have to change tack if there is to be a post-Brexit trade deal, with just two months to go until both sides take stock of whether an agreement is possible. View Article

European Policy Centre: The next phase of Brexit negotiations : It will be more challenging for the EU27 to remain united and reach a deal on the future EU-UK relationship than on the divorce. Continuing the transparent and collaborative negotiation style of the European Commission’s Task Force will be crucial. View Article

 UK Finance: Current State of Play: The UK’s Departure from the EU : The ambitious task for the UK and the EU of negotiating a new trading relationship by the end of the year remains. View Article

 LSE's Ryan: A Joe Biden Presidency and Congress May Block US-UK Post-Brexit Trade Deal : A No Deal Brexit scenario complicates the economic and political consequences for Ireland causing repercussions for trade negotiations between the UK and the US because of the historic commitment by the US to the peace process in Northern Ireland and the Irish-American vote in US national politics.  View Article

                                            Follow us on